Franchise Compliance Guide
Which states require franchise brokers, consultants, and sales agents to register before selling franchises? A complete state-by-state guide for 2026, including California's new Franchise Broker Registration Act and the NASAA Model Franchise Broker Registration Act adopted May 4, 2026.
3
States Requiring Broker Registration
5
States Considering Legislation
43
States with No Broker Requirement
A franchise broker (also called a franchise consultant, sales agent, or referral agent) is anyone who helps match prospective franchisees with franchise brands, typically earning a commission on each sale. This includes independent brokers, franchise consulting firms, and in-house sales teams.
While the federal FTC Franchise Rule requires franchisors to provide a Franchise Disclosure Document (FDD) to prospects, it does not mandate broker registration. However, some states have enacted their own broker registration requirements that go beyond federal law.
Key distinction: Franchise broker registration is separate from franchisor FDD registration. A state may require franchisors to register their FDD without requiring individual brokers to register separately (and vice versa).
On May 4, 2026, the North American Securities Administrators Association (NASAA) formally adopted the Model Franchise Broker Registration Act after two years of public comment and stakeholder engagement. This model law provides a comprehensive template that any U.S. state can adopt to regulate franchise brokers. It does not automatically create new obligations — it must be enacted state by state. But with California already implementing SB 919 (modeled on earlier NASAA drafts) and several registration states actively reviewing the model, this framework is likely to reshape broker compliance nationwide over the next 2-4 years.
If a state adopts the model act (with or without modifications), franchise brokers and their representatives would need to comply with these core requirements:
Mandatory Broker Registration
Both franchise brokers and franchise broker representatives must register with the state regulator and renew annually before engaging in any franchise sales activity. Registration applies to anyone who “directly or indirectly” facilitates franchise sales for compensation — including brokers, consultants, advisors, referral agents, lead generators, and sales organizations.
Pre-Sale Disclosure Statements
Brokers must deliver a disclosure document to prospective franchisees before any in-person or electronic communication about a specific franchise opportunity. Disclosures must cover compensation structures (commissions, fees, equity, royalty shares), material litigation history, and any enforcement actions. This is separate from the franchisor's FDD.
Record-Keeping & Audit Requirements
Registered brokers must maintain complete books and records related to franchise offers and sales for at least five calendar years — even after ceasing business operations. State regulators have audit authority over these records.
Franchisor Due Diligence Obligation
Franchisors and subfranchisors are prohibited from using unregistered brokers. This creates an affirmative obligation for franchisors to verify broker registration status in each applicable state, with potential legal exposure if they fail to do so.
Education & Testing (Optional for States)
The model act authorizes state regulators to impose pre-registration education requirements, examinations, and continuing education — similar to securities broker licensing. States can choose whether to implement this provision.
Enforcement & Penalties
State regulators may deny, suspend, or revoke broker registrations for misconduct, insolvency, or material misstatements. Violations can trigger civil and criminal penalties, rescission rights for franchisees, and injunctive relief.
The model act's definition of “franchise broker” is intentionally broad. Registration requirements are triggered by conduct, not job title. The following activities (direct or indirect) can trigger compliance obligations:
No state has enacted the NASAA model act yet (it was adopted May 4, 2026). However, several states are already moving toward broker registration:
Signed into law in 2024, effective July 2026. First state law based on NASAA's framework. Requires franchise broker registration with the Department of Financial Protection and Innovation (DFPI), annual renewal, pre-sale disclosure documents, and background checks. Franchisors cannot use unregistered brokers.
Enacted April 2026, effective October 2026. While primarily focused on franchise registration modernization and franchisee protections (free association rights, extended statutes of limitation), Maryland is a franchise registration state with active regulatory oversight and a likely candidate for future NASAA model act adoption in the 2027-2028 session.
These states have historically expanded franchise regulation and maintain active franchise registration or relationship laws. Illinois and Minnesota are franchise registration states with strong franchisee protections. Massachusetts and Connecticut have considered franchise relationship legislation. All are potential early adopters of the NASAA model framework.
NY and WA already have broker registration requirements that predate the NASAA model act. These states may align their existing laws with the NASAA framework over time, potentially adding enhanced disclosure or record-keeping requirements.
Verify broker registration in every state
Under the model act, franchisors cannot use unregistered brokers. This means you need a compliance process to verify that every broker, consultant, or referral partner is properly registered in each state where they operate — not just where the franchisor is registered.
Review compensation structures
The model act's definition of “consideration” is broad — it covers equity, royalty shares, buy-out rights, and any promise of payment, not just cash commissions. Evaluate whether any of your broker arrangements could trigger registration requirements in adopting states.
Prepare broker disclosure templates
Pre-sale disclosure documents must be ready at the first point of contact with a prospect. If you work with brokers in multiple states, you may need jurisdiction-specific disclosure forms that comply with each state's version of the model act.
Budget for multi-state compliance
Each adopting state will have its own registration fees, renewal schedules, and reporting requirements. For brands using national broker networks, compliance costs could be significant. Start planning now for the 2027-2028 legislative cycle.
| Period | Expected Developments |
|---|---|
| Mid-2026 | CA SB 919 takes effect (July 2026). NY and WA continue existing broker registration. NASAA model act available for state adoption. |
| Late 2026 | Maryland Franchise Reform Act takes effect (Oct 2026). States begin reviewing NASAA model act for 2027 legislative sessions. |
| 2027 Session | Expect 2-4 states (likely IL, MN, or Northeast states) to introduce broker registration bills based on the NASAA model. Early hearings and stakeholder comment periods. |
| 2028-2029 | If early adoptions succeed, expect broader state-level adoption. By 2029, broker registration could be required in 8-12 states, covering most franchise registration jurisdictions. |
Learn more about franchise brokers and how they operate: Franchise Brokers Guide
The FTC is intensifying its enforcement of the Franchise Rule — and third-party sellers and brokers are squarely in the crosshairs. At the May 2026 IFA Legal Symposium, FTC Franchise Rule Program Manager Christine Todano appeared alongside IFA General Counsel Sarah Davies, signaling the agency's ongoing engagement with the franchise industry and its focus on disclosure compliance. Here's what brokers and franchisors need to know.
On March 18, 2026, the FTC announced a record-breaking settlement against Xponential Fitness — the largest franchise enforcement action in the agency's history. Xponential, which franchises Club Pilates, Pure Barre, YogaSix, StretchLab, BFT, and other boutique fitness brands (approximately 2,500 U.S. studios), was ordered to pay $17 million in franchisee redress.
Misrepresented time-to-open
Xponential claimed studios would be operational within 6 months. FTC found it typically took over a year — and some never opened at all. Franchisees incurred substantial unexpected costs due to delays.
Concealed executive litigation history
Failed to disclose that CEO Anthony Geisler had been repeatedly sued for fraud and was actively involved in franchise sales. Also failed to disclose the former President of Franchise Development's bankruptcy — both required Franchise Rule disclosures.
Misreported franchisee turnover
Omitted names of franchisees whose studios had ceased operation and provided outdated contact information, preventing prospects from verifying turnover rates — a core FDD Item 20 requirement.
Failed to provide FDDs within 14-day window
Prospective franchisees were not receiving legally mandated disclosure documents at least 14 calendar days before signing binding agreements or making payments.
While the Xponential case targeted a franchisor, the enforcement signals a broader regulatory environment that directly affects third-party sellers and brokers:
Brokers are the first point of contact — and the first point of liability
The FTC found that prospects were not receiving FDDs within the 14-day window. In many franchise systems, the broker controls the initial prospect interaction. If a broker facilitates a sale without ensuring the franchisor has delivered the FDD on time, both the franchisor and the broker face exposure.
FTC may incorporate broker disclosure into Franchise Rule amendments
The FTC has been conducting a rule review since 2023, gathering public comments on franchisor control over franchisees. Industry observers, including the Franchise Times, have reported that the FTC may incorporate a version of third-party seller disclosure requirements into any Franchise Rule amendments — potentially creating the first federal-level broker obligations.
Section 5 liability extends to brokers
Even without broker-specific registration, the FTC can pursue individual brokers under Section 5 of the FTC Act for deceptive practices. Misrepresenting franchise performance, earnings potential, or time-to-open — common broker pitch points — is independently actionable.
Non-disparagement clauses under scrutiny
The FTC now warns that franchise non-disparagement clauses may violate federal law if they prevent franchisees from communicating truthful information to regulators or other prospective buyers. Brokers who encourage franchisors to include these clauses face indirect exposure.
Based on the Xponential complaint and recent FTC enforcement patterns, these are the primary triggers for regulatory action:
| Trigger | FTC Focus Area | Broker Relevance |
|---|---|---|
| Misleading earnings claims | Item 19 financial performance representations | Brokers often share revenue/earnings figures verbally — must match FDD |
| Concealed executive history | Items 2 & 3 (business experience, litigation) | Brokers must not downplay or omit known executive issues |
| Inflated time-to-operate claims | Item 7 (initial investment), operational timelines | Common sales pitch point — must align with actual franchisee experience |
| Incomplete FDD delivery | 14-day pre-sale delivery requirement | Brokers who rush closings without confirming FDD receipt share liability |
| Underreported franchisee churn | Item 20 (outlet turnover data) | Brokers who direct prospects away from closed/transferred franchisees |
| Non-disparagement suppression | Section 5 unfair/deceptive practices | Brokers facilitating silencing of franchisee complaints |
The FTC's Franchise Rule operates as a federal floor — it sets minimum disclosure requirements nationwide. State broker registration laws (NY, WA, CA) and the NASAA Model Act add additional layers:
Federal (FTC Rule)
Requires franchisors to provide FDD to prospects 14 days before signing. No broker registration requirement. Applies nationwide. Enforced by FTC under Section 5.
State Registration (NY, WA, CA)
Adds broker-specific registration, background checks, and disclosure requirements. Enforced by state Attorneys General. Brokers face dual liability under both federal and state law.
NASAA Model Act (State-by-State)
Template for additional broker registration, pre-sale disclosure, record-keeping. Must be enacted by each state. Expected to add 3-5 state requirements by 2028.
Potential Federal Amendment
FTC considering third-party seller disclosure requirements as part of ongoing Franchise Rule review. Could create the first federal-level broker obligations, superseding the current state-only patchwork.
Never share earnings or performance claims that aren't in the FDD Item 19 — verbal “typical” numbers are Section 5 liability.
Confirm FDD delivery at least 14 days before any signing or payment — document the delivery date.
Register in every state where you operate before selling (currently NY, WA, and CA after July 2026).
Do not discourage prospects from contacting current or former franchisees — Item 20 references exist for a reason.
Track the FTC's ongoing Franchise Rule review for potential broker disclosure mandates — the regulatory landscape could shift from state-only to federal.
REGISTRATION REQUIRED
Franchise brokers must file a separate broker registration application with the NY Attorney General. Requires detailed personal and business disclosure, background check, and fee.
REGISTRATION REQUIRED
Anyone offering or selling franchises in Washington must register as a franchise broker. Separate registration form required with background disclosure.
REGISTRATION REQUIRED
SB 919 (Franchise Broker Registration Act) signed into law, effective July 2026. Requires annual registration with the Dept. of Financial Protection and Innovation, pre-sale disclosure documents, and background checks.
POTENTIAL FUTURE REQUIREMENT
Registration state for franchisors. No separate broker registration yet, but NASAA Model Franchise Broker Registration Act could influence future legislation. Franchise brokers may need to comply with general business opportunity laws.
815 ILCS 705/1 et seq.POTENTIAL FUTURE REQUIREMENT
Registration state for franchisors. HB 730/SB 415 (Franchise Reform Act) enacted April 2026, effective Oct 2026 — modernizes registration process, adds franchisee protections. No broker registration yet, but Maryland is a likely NASAA Model Act adopter in 2027-2028.
Md. Code, Bus. Reg. § 14-201 et seq.; HB 730/SB 415 (2026)POTENTIAL FUTURE REQUIREMENT
Registration state with strong franchisee protections. No broker registration requirement. State has historically expanded franchise regulations and may follow NASAA Model Act.
Minn. Stat. § 80C.01 et seq.POTENTIAL FUTURE REQUIREMENT
Not a registration state for franchisors. However, MA has considered franchise relationship legislation. NASAA Model Act could be introduced in future sessions.
M.G.L. c. 93A (consumer protection)POTENTIAL FUTURE REQUIREMENT
Business opportunity law state. Franchise offerings may fall under CT Business Opportunity Investment Act if structured as biz opps. No franchise broker registration.
Conn. Gen. Stat. § 36b-600 et seq.| State | Franchisor Reg? | Details |
|---|---|---|
| Texas | No | Filing state only. No franchise broker registration. Franchisors must file a notice with the Secretary of State but no broker-specific requirements. |
| Florida | No | Filing state only. No franchise broker registration. Sellers of business opportunities must file with the Dept. of Agriculture but franchise brokers are exempt. |
| Georgia | No | Not a registration or filing state for franchisors. No franchise broker registration requirement. Only federal FTC Franchise Rule applies. |
| Ohio | No | Not a registration state. Business opportunity purchasers protection act may apply to certain franchise structures. No broker registration. |
| Pennsylvania | No | Not a registration state. Franchise brokers subject only to FTC Rule. No state-specific registration or filing for brokers. |
| New Jersey | No | Not a registration state. NJ Franchise Practices Act applies to relationships but not pre-sale registration. No broker registration. |
| Colorado | No | Not a registration state. The Colorado Securities Act may apply to investment-related franchise offerings but no franchise-specific broker registration. |
| Arizona | No | Not a registration state. No franchise broker registration. Only federal FTC Rule applies. |
| Nevada | No | Not a registration state. No franchise-specific broker registration. |
| Tennessee | No | Not a registration state. Tennessee Consumer Protection Act applies. No broker registration. |
| North Carolina | No | Not a registration state. Business opportunity law may apply. No franchise broker registration. |
| Michigan | Yes | Registration state for franchisors. No separate broker registration requirement. |
| Virginia | Yes | Registration state for franchisors. No separate broker registration. Franchise relationship law prohibits cancellation without reasonable cause. |
| Indiana | Yes | Registration state for franchisors. No separate broker registration. |
| Hawaii | Yes | Registration state for franchisors. No separate broker registration. |
| Rhode Island | Yes | Registration state for franchisors. No separate broker registration. |
| South Dakota | Yes | Registration state for franchisors. No separate broker registration. |
| North Dakota | Yes | Registration state for franchisors. No separate broker registration. |
| Wisconsin | Yes | Registration state for franchisors. No separate broker registration. |
| Kentucky | No | Filing state for business opportunities. No franchise-specific broker registration. |
| Utah | No | Filing state. Business opportunity disclosure requirements may apply. No franchise broker registration. |
| Maine | No | Not a registration state. No franchise broker registration. |
| New Hampshire | No | Not a registration state. No franchise broker registration. |
| Vermont | No | Not a registration state. No franchise broker registration. |
| Oregon | No | Not a registration state. No franchise broker registration. |
| Alabama | No | Not a registration state. No franchise broker registration. |
| Alaska | No | Not a registration state. No franchise broker registration. |
| Arkansas | No | Not a registration state. No franchise broker registration. |
| Delaware | No | Not a registration state. No franchise broker registration. |
| Idaho | No | Not a registration state. No franchise broker registration. |
| Iowa | No | Not a registration state. Has a franchise relationship act. No broker registration. |
| Kansas | No | Not a registration state. No franchise broker registration. |
| Louisiana | No | Not a registration state. No franchise broker registration. |
| Mississippi | No | Not a registration state. No franchise broker registration. |
| Missouri | No | Not a registration state. No franchise broker registration. |
| Montana | No | Not a registration state. No franchise broker registration. |
| Nebraska | No | Not a registration state. No franchise broker registration. |
| New Mexico | No | Not a registration state. No franchise broker registration. |
| Oklahoma | No | Not a registration state. Has a relationship law for specialized industries. No broker registration. |
| South Carolina | No | Not a registration state. S.1007 (Franchise Act of 2026) pending for joint employer clarification. No broker registration. |
| West Virginia | No | Not a registration state. No franchise broker registration. |
| Wyoming | No | Not a registration state. No franchise broker registration. |
| District of Columbia | No | Not a registration state. No franchise broker registration. |
These 14 states require franchisors to register their FDD before offering or selling franchises. This is separate from broker registration.
NY
New York
WA
Washington
CA
California
IL
Illinois
MD
Maryland
MN
Minnesota
MI
Michigan
VA
Virginia
IN
Indiana
HI
Hawaii
RI
Rhode Island
SD
South Dakota
ND
North Dakota
WI
Wisconsin
Determine your registration states
If you or your clients operate in NY, WA, or CA, you must register as a franchise broker.
Prepare disclosure documents
Gather personal and business history, background check materials, and any required financial statements.
File registration applications
Submit to the appropriate state agency (Attorney General or Dept. of Financial Protection). Allow 30-60 days for review.
Comply with pre-sale disclosure
In registered states, deliver broker disclosure documents to prospective franchisees before any sales activity.
Monitor NASAA Model Act adoption
More states are likely to adopt broker registration requirements. Track legislation on our Franchise Legislation Tracker.
Renew annually
Broker registrations must be renewed each year. California's new law requires annual renewal with the DFPI.
It depends on the state and your compensation structure. In NY, WA, and CA, anyone who earns compensation for facilitating a franchise sale generally must register as a broker, even if they only refer leads. Check each state's specific definition of "franchise broker."
No. FDD registration is required of franchisors in 14 states. Broker registration is required of individual brokers or sales agents in 3 states (NY, WA, and soon CA). They are separate processes with separate applications.
In states with broker registration requirements, selling franchises without registration can result in civil penalties, rescission rights for franchisees (they can get their money back), and potential criminal misdemeanor charges. Fines vary by state but can reach $10,000+ per violation.
No. The FTC Franchise Rule (16 CFR Part 436) requires franchisors to provide an FDD to prospects, but it does not mandate broker registration. State laws are what create broker registration requirements.
Likely yes. The NASAA Model Franchise Broker Registration Act (proposed 2024, revised 2025) provides a template for states to adopt. California's SB 919 is the first implementation. Expect 3-5 additional states to introduce broker registration legislation in the 2026-2027 legislative sessions.
Access Item 19 financials, fee structures, closure rates, and franchisee data for 5,800+ brands on FDDIQ.
Browse FranchisesLast updated: May 2026. This guide is for informational purposes only and does not constitute legal advice. Consult a franchise attorney for compliance guidance specific to your situation.